Intel Eyeing Infineon's Wireless Chip Unit?

Intel is reportedly in the final stages of working out a deal to purchase the wireless chip business from Infineon Technologies in a deal that would top $1 billion and put Intel in the mobile communications market in a big way.

The report first appeared in the German daily newspaper DieWelt (available here in German), not exactly a typical source for technology news and rumors.

But Infineon is a spin-off of the German industrial electronics giant Siemens AG, so the source is likely in Germany. The article said negotiations are taking place in Munich, and that investment bank J.P.Morgan is handling the deal.

The article said Intel (NASDAQ: INTC) was prepared to spend between $1.1 billion and $1.4 billion for the business. The Wireless Solutions business generated revenues of 917 million euros (US$1.15 billion) and had an operating loss of 36 million euros ($45 million) in fiscal 2009.

An Intel spokesperson declined to comment on what the company called rumor and speculation.

However, mobile chip analyst Will Strauss believes the deal will happen. "Don't forget, Intel under new management really wants to get back into the cellular business because it's the only market that approaches the size of the PC business. There is no bigger market and they really do want to get into it," Strauss, principal analyst with Forward Concepts, toldInternetNews.com.

Intel has tried for the cell phone market before, purchasing DSP Communications for $1.6 billion in 1989, but that proved disastrous.After a $600 million write-down, it sold off the business for $600 million to Marvell Communications in 2006, and Marvell is making a much better go at that market, Strauss said.

For its part, Infineon would be giving up almost one quarter of its revenue, but it also means it can concentrate on its primary market, the automotive market. Despite its problems in recent years, Strauss said, "It's coming back pretty well."

Infineon's baseband and RF transceiver chips are in every iPhone, plus phones by Nokia, Ericsson, LC and Samsung. Baseband and RF transceiver chips constitute 90 percent of what you need to make a cellphone, said Strauss.

Combine that with Intel's new "Moorestown" Atom processor, a very low power chip that Intel has repeatedly positioned as a cell phone alternative, and Intel becomes a one-stop shop for almost everything in the phone. At that point you just need power amplifiers, memory, a motherboard and a battery.

"This would bring them toe to toe with Qualcomm, who are number one in cell phone chips," said Strauss. "They really have no choice if they want to get in to the cell phone business in a big way. Otherwise they'd have to pick up a half dozen small companies."

Andy Patrizio is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.